The scheme for independent bicycle dealers (IBDs) is run by the Association of Cycle Traders in association with Booost Ltd.
The ACT also wrapped up a deal with IBD-only supplier Giant UK, although the ACT is looking for other suppliers to join its scheme.
Booost Ltd. MD Chris Morris had spotted a gap in the market for a service provision company to market the complex voucher system to employers. The voucher scheme enables employees to buy bikes (and PCs) via employer-initiated loans, with the government providing tax-savings that enable employees to get discounts of about 50 percent.
"There are loan schemes in the market already that are just interest-free loans. They do not work in quite the same way [as this scheme]," said Morris.
"The employee salary sacrifices the gross amount minus VAT. The employer claims back the VAT and can pass this benefit on. Tax savings are made by the employee on the amount of salary sacrificed. Technically, the employer is loaning the bike or PC until the end of the term of finance and the final payment gives the employee the option to purchase."
Giant's Ian Beasant said the scheme will likely lead to consumers deciding to spend more on bikes than they may otherwise have done. The ACT agrees. In a Booost/ACT flyer there's this example transaction:
"The employee could normally afford to spend £250 on a bike and accessories. The scheme enables them to spend £500."
Giant's Ian Beasant stressed: The IBD channel needs to be a player within the scheme. Until now its all going to Halfords. Something had to be done otherwise the potential loss of business to IBDs could be huge.
Beasant said the scheme was win-win for IBDs, suppliers, employers, employees and the government.
Employers offer their employees bike-buying loans. The bikes attract VAT at 17.5 percent but this is claimed back by the employers. The loan is deducted from total salary before tax and national insurance contribution (NI). After the loan is agreed and deducted from the salary, tax and NI is calculated therefore the value of the loan is tax and NI-free. So, there could be aggregated saving of more than 50 percent per bike.
Most major employers - with thousands of staff on their payroll - now have Travel Plan managers in order to get more people to cycle, walk, and take the bus to work.
The scheme is similar to one offering tax breaks for IT equipment purchase. See:
For PC buying there is a £500 ceiling per annum (ie to buy a £1500 PC) but there is no upper limit to the price of the bike bought by the employee.
The Booost website does not yet have details of the ACT/Giant scheme but Morris said the site would be updated soon.